True North: Economics and Humanity are Compatible

Today's New York Times has a glowing review of True North, by Bill George (Former CEO of Medtronic, a Jim Collins "Good to Great" leader, and now a Professor at Harvard Business School teaching leadership), with help from Peter Sims. The book is based on interviews with 125 other leaders and executives like Starbuck's Howard Schultz and Xerox's Ann Mulcahy. These cases -- in combination with George's accomplishments -- show that leaders who create humane organizations that really care about their people and their customers -- and don't just view them as units that exist for the purposes of extracting "as much economic value as possible" every minute of every day -- not only can thrive financially, they do it in such a way that people can travel through their days with dignity. And as George shows with his cases of successful leaders, they can also have a life outside of work.

I find this book so encouraging because it defies the assumption in so many companies that the key to success is squeezing everything you can out of your people (and customers) RIGHT NOW and then discarding them the minute that the return on investment goes south. I saw these assumptions in action at a professional service firm that I spoke at about five years ago in Baltimore. I had a couple phone conversations with the Chair of the firm where he was abrupt and -- although he had signed the contract already -- didn't want to talk about the content of the talk, he just wanted to continue negotiating the terms of the deal in his favor. Then, when I arrived, I sat next to a partner who had been with the firm over 30 years, and -- although we had barely met -- one of the first things out of his mouth was, "This used to be a place where we prided ourselves on striking a balance between humanity and economics; now it is all economics all the time. It is a cold heartless place that sees people and clients as units of production, and nothing else." Perhaps 30 minutes later, when I spoke to the head of the firm, all he talked about was how important he was and about pushing profits higher and higher as quickly as possible.

I was shocked by how widespread the asshole poisoning was in the company. During the time I was around, I only had two kinds of interactions with people:

1. Either they expressed hurt or fear (like the woman -- a senior partner -- who told me how hard it was for her to succeed because the "model" partner had a wife who did all the child care, and her husband also worked. Even though she was "highly profitable," the senior management of the firm viewed her children as a black mark against her).

2. Or they people expressed hostility -- putting down people in nasty ways. At first, I thought they didn't like me, as nearly every conversation wasn't just an argument, it was like talking to Simon Cowell on the American Idol. People didn't just put down my ideas, the disagreement was also peppered with personal insults. I then realized that this was exactly how the Chairman interacted with everyone else in the firm, so it was an interaction norm that everyone followed and enforced. True North is such an important book because -- in sharp contrast to this nasty firm -- it shows that leaders who authentically care about their people and customers not only create more humane places, but that caring translates into greater commitment and loyalty. And it has other more subtle effects too. If you care about people, and are humble and wise enough to listen to them and hear what they actually say, you end-up focusing on what they need to succeed emotionally and financially. Not on getting as much money out of them this minute as much as possible. At the Stanford d.school, we call this the human-centered design process, and Bill George's words and (more importantly) his actions show that such understanding translates into better leadership because you can end-up giving employees and customers what they need -- not what you believe they should have or what is best for you in the short-term.

Let me give you a specific example from Bill George. I have met Bill a couple of occasions and seen him speak twice. When Bill took over as CEO of Medtronic, which is a medical device company, he had no prior experience in the industry. As Jeff Pfeffer and I show in The Knowing-Doing Gap, leaders who are brought in to operate a business that they don't understand often get in big trouble -- too often, they ride into town and make massive changes, without taking the time to learn the business. I asked George how he dealt with his lack of knowledge of the industry. He told me that he spent 70% of his time during the first nine months that he was CEO in hospitals, watching surgeons install Medtronic devices in people and talking to doctors, hospital administrators, nurses, and patients about their view of the company and it's products.

I believe that most boards of directors and stock analysts would balk at a CEO who did this and complain that he or she wasn't spending enough time running the company. But George's understanding of the human impact of his company's products appeared to pay off in the long run -- during the decade that he led Medtronic, it's market capitalization rose from about 1 billion to about 60 billion. Not bad for a guy who puts people first and believes that employees need a balance between life and work.

To return to the difference between the leader of that professional services firm and the leaders that Bill George wants to select and breed, as The New York Times says, "That's a common thread in the strongest leaders, Mr. George argues: they have a deep desire to serve a greater goal beyond making money."